Consider This Surging Automotive Company

I recall my first time seeing the electric sports car marketed by Tesla Motors, Inc. (NASDAQ/TSLA). While my son thought it was cool, I thought it was gimmicky.

If I had listened to my son, it would have been a great investment because Tesla was trading around $33.00 at that time in November 2012. The stock spiked to $133.26 on July 15 this year, up a whopping 272.64% over the past 52 weeks, according to my stock analysis.

Even as Tesla moved higher (as you can see in the stock chart above), I was still not convinced, as my stock analysis suggested that General Motors Company (NYSE/GM) and Ford Motor Company (NYSE/F) made more sense.

The reasoning behind my stock analysis was simple: the comparative metrics between Tesla versus General Motors (GM) and Ford easily favored the old Detroit icons. But I clearly underestimated the future expectations of the company.

Chart courtesy of www.StockCharts.com

Tesla fell 14% the day following its high after Goldman Sachs suggested the stock was worth only $85.00, based on the company’s stock analysis.

The stock rallied $16.00 after analyst Andrea James of Dougherty & Co. announced that it had estimated Tesla was worth at least $200.00 and perhaps as much as $300.00 if the company executed. (Source: Rosenberg, A., “Tesla will double again: Analyst,” CNBC web site, July 17, 2013.)

So while I was previously thinking of a short trade with Tesla, I’m now thinking the company—which is the brainchild of Elon Musk, who made hundreds of millions via tech ventures—may be worth a closer look, based on my stock analysis. The man is simply brilliant.

While the current valuation of Tesla is out of whack, according to my stock analysis, the company definitely has long-term promise—especially if it can deliver on its plan and the demand for high-end electric cars continues to pick up.

After reading through some of the details of Musk’s plans, I’m becoming more intrigued. At the center of the company’s strategy is the building of a “Supercharger” network that the company predicts will eventually cover about 98% of the United States by 2015.

As my stock analysis indicates, the concept is really interesting, based on the building of the Supercharger network. The Supercharger service can recharge a Tesla car via the changing of the battery pack, and it’s free if you buy the more powerful battery. The whole process to automatically change the battery takes less than 90 seconds, according to the company.

This is impressive, and considering the high cost of fuel and the rising demand of electric cars, I actually see some promise in Tesla especially since the company’s vehicles are much more sporty than its competitors’ vehicles. While the cost of a Tesla vehicle is comparatively high, the company is working at producing cheaper vehicles with a sub-$40,000 price tag in order to drive sales.

So my stock analysis suggests that you should keep an eye on Tesla. I wouldn’t be a buyer now, but this stock could become a more interesting stock to consider buying on price weakness, or you can consider trading via call options. For example, if Andrea James is right, you can buy the January 2015 $190.00 call trading at a current premium of $17.70. The breakeven would be $207.70; but as my stock analysis indicates, this trade is risky, as Tesla would need to jump 73% before you’d reach this breakeven point—which is difficult, but achievable.

Retire on one hot stock

Presenting Our Top Stock Pick for 2015!

It is one of the leading companies in its industry. With quarterly revenue of $800 million and growing this company is
generating over $300 million every three months in free cash flow!

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George Leong is a senior editor at Lombardi Financial. He has been involved in analyzing the stock markets for two decades, employing both fundamental and technical analysis. His overall market timing and trading knowledge are extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi Financial’s popular financial newsletters, including Red-Hot Small-Caps, Lombardi’s Special Situations, Judgment Day Profit Letter, Pennies to Millions, and 100% Letter. He is also the editor-in-chief of a... Read Full Bio »

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Forecasts Aug. 2, 2015

Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the metal.

Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, the U.S. economy is also entering a slow growth phase (1Q15 GDP of -0.7%) which will negatively impact an already overpriced equity market.

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